NEW PENSION LAW ADOPTED

Effective For New Hires Beginning Next April

NOVEMBER 15, 2011: Pension Reform III (S2065) is now on the verge of becoming law. By a vote of 27-10 in the Senate and 152-0 in the House, today the Legislature enacted a change in the Commonwealth’s public retirement law that will place new employees in a “second tier” retirement plan.

Effective next April 2, all new hires within our state’s 105 retirement systems will close the door on early retirement and require most workers to stay in the system until age 67 in order to reach a full pension.

“While our Association had no problem with new hires working until a later age, we opposed the new age reduction formula imposed on employees who don’t or can’t work until age 67,” said Association President Ralph White. “The penalty for not staying until 67 is too severe – too punitive for 35 year employees, who want to retire in their early 60s, or, in some cases, are forced to retire.

“Public safety employees (Group 4) will also have to work at least two years longer to a maximum age 57 factor. This is not unreasonable, but because of the new reduction formula it is a concern for fire and police unions where some employees, who begin service at a later age than say 28, would be working into their 60s.  A safety threat, so to speak”

When the reform legislation was filed by Governor Patrick amidst great fanfare and support by the media, it was considered to be a long-range panacea for the Commonwealth’s huge unfunded pension liability, which was brought about because of government’s failure to contribute its share to the pension savings fund.

While the new law, which will shortly be signed by the Governor, and save a much-touted supposed $5 billion, does not affect current employees or retirees, it forces new hires to fund a system to which they will be totally paying for their own pension.

“New hires will be paying the price, no doubt about it, said White. “Any good actuary will tell you that a Group 1 employee will more than pay for his or her own pension with their contributions. And, that is with a compounded assumption of less than the current 8% investment return.

“Best of luck to all new employees. At least you’ll have a decent job and I guess that’s at least a plus these days.”

A copy of S2065 can be downloaded here.

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